McCann Fund Losses 80%: Why Do Crypto Liquidity Funds Perform So Poorly in a Bull Market?

BTC has risen by over 27% this year, but most crypto liquidity funds not only failed to outperform the market but also experienced significant losses and forced closures. Joe McCann's Asymmetric fund's half-year loss of millions of dollars is the best example, raising questions like: "How can you lose money even in a bull market?"

Analyzing Asymmetric's 80% Half-Year Loss: High Leverage and High Exposure

Recently, the most talked-about liquidity fund closure case in the crypto industry is Joe McCann's Asymmetric's Liquid Alpha Fund. The fund, which boasted a "high volatility market strategy," has sadly closed after losing 80% from the beginning of the year.

(Hedge fund loses millions, founder Joe McCann turns to lead the world's largest SOL Treasury company)

DeFiance Capital founder Arthur Cheong pointed out that Asymmetric is the "worst-performing" liquidity fund he knows. Even though most funds recovered in the second quarter, with some making up for first-quarter losses, this fund showed no improvement:

Asymmetric's trading style might be the reason for massive losses, including high-leverage derivative operations in extremely volatile markets, over-trading meme coins like BONK and MOTHER, and possibly counterproductive options strategies.

Why Can't Liquidity Funds Outperform BTC?

According to Galaxy's VisionTrack data, the hedge fund index performance until June was:

• Fundamental Index: -13.74%

• Composite Index: -6.36%

• Market Neutral Strategy: 5.05%

• Quantitative Strategies: 0.26%

Meanwhile, BTC's year-to-date increase is 27.1%, in stark contrast to the above data.

Why? The Block's latest 'The Funding' points out that many liquidity funds are limited by compliance or limited partner (LP) regulations, unable to directly hold BTC, and can only seek targets in generally poor-performing altcoin markets, yet are compared to BTC's performance.

Pantera Capital partner Cosmo Jiang described:

Using BTC as a performance benchmark for liquidity funds is like using Nvidia to measure an ordinary stock fund's performance - it's not fair.

Fund Managers' Nightmare in This Cycle: Choosing Wrong Tokens and Missing Rebounds

Besides operational constraints, "choosing wrong targets and missing opportunities" further worsened many funds' situations. Maven 11 Capital's investment director Balder Bomans mentioned that before June, most altcoins slowly collapsed, dropping 50% to 80% from all-time highs, with many funds unable to reduce positions and missing the May to July rebound due to insufficient position liquidity:

Uncertain macro economics, constantly changing narratives, and lack of liquidity management experience made it difficult for many fund managers to accurately measure position sizes and exit successfully, making their performance even more severe.

Syncracy Capital founder Ryan Watkins noted: "In this cycle, very few tokens outperform BTC, so the probability and cost of betting on the wrong token are high."

(How market collapse impacts VCs: Crypto venture capital shifts from private to liquid funds, with strategy flexibility becoming key)

Back to Basics: Fund Winners Rely on Careful Selection and Risk Control

The shift from speculative, meme coin-driven capital flow to more fundamentals-driven investment might have caught some funds off guard.

In this fund shake-up, the investment market is returning to "fundamentals-driven" approach. Framework Ventures partner Patel-O'Connor directly stated: "Such a rapid change might have caught some funds unprepared, with most still adapting."

Now, protocols need to actually make money, with those having concrete business models, actual revenue, user scale, and profit-sharing or incentive mechanisms gaining favor.

Dragonfly partner Rob Hadick added: "The fund's 'risk control ability' has also become a crucial winning factor in this cycle. Beyond selection, timely entry and exit and flexible allocation are key to surviving in a highly volatile market."

The Next Stop for Liquidity Funds: More Sensitive and Decisive

This bull market can be described as quite challenging for liquidity funds, with various data revealing the strategic failures and operational challenges faced by active funds.

As the market gradually shifts from speculation to fundamentals, future winning funds will no longer rely solely on risk appetite and high leverage, but will return to the real skills of token selection, risk management, and liquidity allocation.

In the bestselling book "Big Debt Crises", Ray Dalio, founder of the world's largest hedge fund Bridgewater Associates, revealed the company's models and principles for predicting and responding to the 2008 financial crisis and 2010 European debt crisis. Recently (on the 28th), he warned in a Podcast that signals of a US debt crisis are flashing, and the market has not yet absorbed the risks, which could lead to a significant market downturn. He recommended allocating 15% of assets to gold and Bitcoin, and although he personally prefers gold, he also stated that he holds Bitcoin.

Cathie Wood's ARK Invest, after selling Coinbase, Robinhood, and Block stocks on 7/21 and 7/24, continued to sell these three stocks and Palantir on 7/28 Eastern Time. Subsequently, they bought Bitmine (an ETH reserve enterprise), NVIDIA (AI chip leader), and AMD.

According to Ark Invest Daily's tracking data, they continued to reduce positions in COIN, XYZ, and HOOD, while also selling PLTR.

1. Coinbase (COIN): ARKW sold 18,204 shares, approximately $6.9 million.
2. Block (XYZ): ARKK, ARKW, and ARKF ETFs collectively sold 186,417 shares, approximately $15.02 million.
3. Robinhood (HOOD): ARKF and ARKW ETFs collectively sold 119,090 shares, approximately $12.71 million.
4. Palantir (PLTR): ARKW and ARKF ETFs collectively sold 61,585 shares, approximately $9.72 million.

Additionally Buying Bitmine and Seizing the Opportunity to Purchase NVIDIA and AMD

While selling the above four stocks, Ark also added more shares of Bitmine, an ETH reserve enterprise, and AI chip leaders NVIDIA and AMD, as follows are Ark's purchase holdings:

1. BitMine (BMNR): ARKK, ARKW, and ARKF ETFs collectively bought 572,853 shares, approximately $20.10 million.
2. NVIDIA (NVDA): ARKQ and ARKX ETFs collectively bought 27,124 shares, approximately $4.79 million.
3. AMD (AMD): ARKQ and ARKX ETFs collectively bought 25,155 shares, approximately $4.37 million.